Why every household is about to get a brand-new fridge

Today’s retail economy is focused on acquisition and retention costs.
Getting into people’s homes and turning them into long-term brand
buyers is the goal, and appliance makers control an untapped resource —
the Internet of Things (IoT) — that can effectively extend a brand or
retailer’s supply chain visibility into the home.
How will the IoT manifest itself in the home? For many consumer
brands and retailers, there’s always been one door that holds the key to
the $65 billion a month American households spend on food:
the refrigerator door. For example, at this year’s CES, Samsung
introduced a refrigerator touted as truly “smart,” with connected
cameras inside the fridge, an ability to run Pandora with built-in
speakers and even grocery shopping through Amazon’s Alexa or a new,
dedicated app called Groceries by MasterCard.
By building smart fridges that can track consumption, deliver offers
and manage purchasing and replenishment, manufacturers can extract
subsidies from companies in order to tap into data and the revenue
stream of each consumer, then provide them with a free refrigerator.
Subsidies have long been a tool for both customer lock-in (think of
InkJet printers sold at a loss to open the revenue stream for ink) as
well as recurring revenue models (such as Verizon trading a $650 iPhone
for the chance at triple the revenue in yearly billings). The smart
fridge brings both of these models into play.
With a connected fridge, advertisers will pay to promote products to
the consumer on the refrigerator’s screen, who will then use a related
subscription-based service to buy the products. What makes promotion
like this appealing to advertisers is that it’s data-driven,
personalized and proactive.
It’s the same reason Google acquired Nest and Apple built HomeKit: It
puts them inside the consumer’s house and gives them the ability to be
“first to market” when a need arises. Like Valleywag’s Sam Biddle tweeted after the Nest acquisition, “If your house is burning down you’ll now get Gmail ads for fire extinguishers.”

In the same way, imagine receiving a $0.50 coupon for Heinz ketchup
just as you toss your empty bottle. Or better yet, what if you got a
coupon for a free bottle of Del Monte ketchup? Would you not try it? And
what if this happened in hundreds of thousands of homes? Del Monte, by
way of example, stands little chance in the battle over supermarket shelf space, but may find a way to challenge Heinz’s near 60 percent market dominance by going directly to a consumer’s fridge.
Food is a recurring purchase, with most Americans
buying the same brands over and over again. While a bottle of ketchup
does not have the lock-in protection of InkJet cartridges, the smart
fridge provides a way to keep the purchase cycle going through
replenishment reminders and promotions. It will play a central role in
ensuring the consumption of the same food brands — or help drive
consumers to a competitor.
Nothing in this life is free, so how will advertisers and retailers
make back the cost of subsidizing these “free” fridges? By tapping in to
years of food purchases via the fridge. There will have to be some
manner of contract (just like with cell phone carriers) to ensure users
behave as intended and buy what the fridge recommends or buy goods from a
certain store. Users will see workflows and behaviors that have been
made most famous through Amazon, such as:

Recommendations — If the smart fridge knows what it contains, it can
make recipe recommendations, which may or may not encourage the
purchase of an additional item (e.g. you have lettuce, tomatoes and
bread, why not buy some delicious Oscar Mayer bacon and have a BLT
tomorrow?).

Subscriptions — By incorporating features similar to Amazon’s
Subscribe and Save program, the fridge can ensure rapid, automated
replenishment that eliminates the window to change brands and keeps
products on hand for continued consumption.

Auto purchase — Despite the ridicule
of Amazon’s Dash Button, automatic purchases are the wave of the
future. Fridges will log consumption and enable users to auto-purchase
depleted goods. It’s this sort of mindless, one-click (or no click)
transaction that is the ultimate in retention methodology.

While the smart fridge brings convenience and new features to
consumers, it is also interesting to consider what consumers could
provide to brands, retailers and each other through machine learning and
artificial intelligence.

Look at the success of an app like Waze. Its power comes from the
volume of people using the software and making recommendations. You
could see the same collective intelligence arise within the smart
fridge. What if Del Monte actually does make better ketchup than Heinz,
but we just don’t know about it? A connected fridge could provide new
insights into tastes and preferences, helping bring better product
awareness to the public. It can also provide superior consumer
intelligence that food and beverage companies could only dream about
when trying to understand buying and consumption habits.
The idea of a free refrigerator may seem radical today, but it’s a
concept that has proven successful in other industries — and the
technology exists to make it work. Ultimately, the consumers are the
ones holding the key to the smart fridge’s future. Are we ready to share
the details of every late-night snack, or will the fridge be the line
that we draw when it comes to sharing our private information with
commercial organizations?